New Delhi, October 29
Gold continues to shine despite the record-high prices. The yellow metal prices saw an increase of 24 per cent this year but buying interest is still high amid volatile markets and geopolitical challenges, according to a report by Religare. Buyers however are cautious given the economic backdrop.
Gold has long held a special place in the Indian culture, particularly during Diwali when families invest in gold jewellery, coins and bars as a token of wealth and luck.
In 2024, however, global economic factors and fluctuating gold prices bring added complexity to this cherished tradition.
Geopolitical instability remains a driving force behind gold's resilience. Ongoing conflicts, like the Israel-Hamas war, have added to existing tensions, with disruptions to global supply chains and heightened inflationary pressures across Asia-Pacific.
The Indian rupee's record low against the US dollar -- recently breaching the 84-mark -- has added another layer of attractiveness to gold. As geopolitical risks fuel higher oil prices and equity outflows, the rupee faces ongoing pressure.
The Reserve Bank of India (RBI) has allowed for a controlled depreciation, reflecting the demand for gold as a safeguard against inflation and currency devaluation.
With persistent inflation, many expect the rupee to remain weak, creating favourable conditions for gold prices to stay high domestically.
Central bank purchases have significantly bolstered gold demand this year. According to the World Gold Council, global reserves increased by 290 metric tons in Q1 alone, marking the largest quarterly increase in over two decades.
Notable purchasers include China's central bank, which added to its reserves for the fifth consecutive month in September, and the Reserve Bank of India, among the top buyers in Q2 2024.
As central banks seek to diversify portfolios amid global instability, robust demand from official sources is expected to sustain gold's position as a high-value asset.
The Federal Reserve's recent rate cut of 50 basis points, the first since 2020, has contributed to gold's upward trajectory. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, spurring interest from both individual and institutional investors.
With US inflation cooling to its lowest level since February 2021, gold remains a preferred inflation hedge, expected to retain its demand as the Fed signals further rate cuts in the coming years.
In 2024, gold experienced an impressive rally, achieving a 24 per cent return on domestic exchanges, with prices currently nearing resistance around Rs. 79,800 per 10 grams (USD 2,800 per ounce). Technical indicators reveal an overbought condition, hinting at a possible short-term correction.
Analysts forecast that prices could pull back to Rs. 76,700 per 10 grams (USD 2,675 per ounce) before resuming upward movement.
For traders, ideal buying opportunities emerge at Rs. 76,500 per 10 grams, with targets set for Rs. 83,000 per 10 grams, and potentially Rs. 86,000 per 10 grams.
A drop below Rs. 72,300 per 10 grams, however, could signal a bearish turn, with prices potentially declining to Rs. 70,000 per 10 grams if this key level is breached.